Exhibit 99.1

ARKO Corp. Reports Second Quarter 2023 Results

Strong Quarter Led by Higher Merchandise Contribution and Acquisitions

ARKO Corp. (Nasdaq: ARKO) (“ARKO” or the “Company”), a Fortune 500 company and one of the largest convenience store operators in the United States, today announced financial results for the quarter ended June 30, 2023.

Second Quarter 2023 Key Highlights1

 

Net income for the quarter was $14.5 million, compared to $31.8 million in the prior year quarter, primarily due to an approximately $15 million increase in depreciation and amortization expenses in connection with recent acquisitions, and favorable fair-value adjustments in the prior year quarter.
Adjusted EBITDA for the quarter was $86.2 million, an increase of $7.2 million, as compared to $79.0 million in the prior year quarter.
Same store merchandise sales excluding cigarettes increased 3.8% for the quarter compared to the prior year period; same store merchandise sales increased 0.7% for the quarter compared to the prior year period.
Merchandise gross profit contribution grew by $6.5 million for the quarter, or 5.0%, on a same store basis, as compared to the prior year period.
Merchandise margin continued to increase by 150 basis points to 31.9% for the quarter compared to 30.4% in the prior year period.
Total retail gallons increased 15.9% in Q2 2023 compared to Q2 2022, while volumes on a same store basis declined 2.6%.

 

Other Key Highlights

On June 6, 2023, closed the acquisition of the retail, wholesale and fleet fueling assets of WTG Fuels Holdings, LLC (“WTG”), the owner of Uncle’s Convenience Stores and GASCARD fleet fueling operations (the “WTG Acquisition”).
Currently available financing of more than $2 billion, including cash, lines of credit and Oak Street agreement.
o
Renewal and increase of GPMP credit line to $800 million, extending maturity to 2028.
o
Amended and extended the program agreement with Oak Street, a division of Blue Owl Capital (“Oak Street”), with capacity of up to $1.5 billion (in addition to the funding for the WTG Acquisition).
Ended quarter with 1.48 million total enrolled fas REWARDS® members, representing a 10.5% increase in enrolled marketable members since the first quarter of 2023.

 


 

On June 30, 2023, introduced a new Pride location in South Windsor, Connecticut, boasting almost 5,000 square feet, indoor and outdoor seating, and a drive through for even more convenience.
Named for the second consecutive year to the 2023 Fortune 500 list, ranking 460th, moving up 38 places from 2022.
ARKO Corp.’s Board of Directors increased the Company’s authorized share repurchase program from $50 million to $100 million.
ARKO Corp.’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock to be paid on September 1, 2023, to stockholders of record as of August 15, 2023.

“I am very proud of the results and performance that the employees of our company were able to achieve this quarter,” said Arie Kotler, Chairman, President and Chief Executive Officer of ARKO. “The team’s key focus is to improve our core convenience store operations through targeted initiatives, like increasing assortment and merchandising mix to give our customers the options and convenience they seek. We always strive to provide the best service and store experience for our customers. We are very pleased with the pace of integration and early results of recent acquisitions. ARKO’s results this quarter demonstrate that our organic initiatives and core M&A and integration capabilities help create long-term stockholder value.”

1 See Use of Non-GAAP Measures below.

 

Second Quarter 2023 Segment Highlights

Retail

 


 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Fuel gallons sold

 

293,584

 

 

 

253,243

 

 

 

542,490

 

 

 

492,801

 

Same store fuel gallons sold decrease (%) 1

 

(2.6

%)

 

 

(10.6

%)

 

 

(4.2

%)

 

 

(7.1

%)

Fuel margin, cents per gallon 2

 

39.7

 

 

 

41.3

 

 

 

37.7

 

 

 

39.4

 

Merchandise revenue

$

484,561

 

 

$

431,751

 

 

$

884,849

 

 

$

798,736

 

Same store merchandise sales increase
  (decrease) (%)
1

 

0.7

%

 

 

(2.7

%)

 

 

2.1

%

 

 

(3.1

%)

Same store merchandise sales excluding
  cigarettes increase (%)
1

 

3.8

%

 

 

1.4

%

 

 

5.6

%

 

 

0.8

%

Merchandise contribution 3

$

154,658

 

 

$

131,364

 

 

$

277,623

 

 

$

239,556

 

Merchandise margin 4

 

31.9

%

 

 

30.4

%

 

 

31.4

%

 

 

30.0

%

 

 

 

 

 

 

 

 

 

 

 

 

1 Same store is a common metric used in the convenience store industry. We consider a store a same store beginning in the first quarter in which the store had a full quarter of activity in the prior year. Refer to Use of Non-GAAP Measures below for discussion of this measure.

 

 

 

 

 

 

 

 

 

 

 

 

 

2 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel.

 

 

 

 

 

 

 

 

 

 

 

 

 

3 Calculated as merchandise revenue less merchandise costs.

 

 

 

 

 

 

 

 

 

 

 

 

 

4 Calculated as merchandise contribution divided by merchandise revenue.

 

 

The table below shows financial information and certain key metrics of recent acquisitions in the Retail Segment that do not have comparable information for the prior periods.

 

 


 

 

For the Three Months Ended June 30, 2023

 

 

For the Six Months Ended June 30, 2023

 

 

Pride 1

 

 

TEG 2

 

 

Uncle's (WTG) 3

 

 

Total

 

 

Pride

 

 

TEG

 

 

Uncle's (WTG) 3

 

 

Total

 

 

(in thousands)

 

 

 

 

Date of Acquisition:

Dec 6, 2022

 

 

Mar 1, 2023

 

 

Jun 6, 2023

 

 

 

 

 

Dec 6, 2022

 

 

Mar 1, 2023

 

 

Jun 6, 2023

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel revenue

$

71,388

 

 

$

99,128

 

 

$

6,098

 

 

$

176,614

 

 

$

139,425

 

 

$

131,202

 

 

$

6,098

 

 

$

276,725

 

Merchandise revenue

 

15,629

 

 

 

39,381

 

 

 

2,846

 

 

 

57,856

 

 

 

29,143

 

 

 

52,324

 

 

 

2,846

 

 

 

84,313

 

Other revenues,
  net

 

1,397

 

 

 

1,322

 

 

 

54

 

 

 

2,773

 

 

 

2,784

 

 

 

1,731

 

 

 

54

 

 

 

4,569

 

Total revenues

 

88,414

 

 

 

139,831

 

 

 

8,998

 

 

 

237,243

 

 

 

171,352

 

 

 

185,257

 

 

 

8,998

 

 

 

365,607

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel costs

 

64,335

 

 

 

90,832

 

 

 

5,020

 

 

 

160,187

 

 

 

125,299

 

 

 

120,617

 

 

 

5,020

 

 

 

250,936

 

Merchandise costs

 

10,185

 

 

 

27,189

 

 

 

1,927

 

 

 

39,301

 

 

 

19,383

 

 

 

36,126

 

 

 

1,927

 

 

 

57,436

 

Store operating
  expenses

 

10,495

 

 

 

18,064

 

 

 

1,225

 

 

 

29,784

 

 

 

20,030

 

 

 

23,576

 

 

 

1,225

 

 

 

44,831

 

Total operating
  expenses

 

85,015

 

 

 

136,085

 

 

 

8,172

 

 

 

229,272

 

 

 

164,712

 

 

 

180,319

 

 

 

8,172

 

 

 

353,203

 

Operating income

$

3,399

 

 

$

3,746

 

 

$

826

 

 

$

7,971

 

 

$

6,640

 

 

$

4,938

 

 

$

826

 

 

$

12,404

 

Fuel gallons sold

 

19,387

 

 

 

30,165

 

 

 

1,714

 

 

 

51,266

 

 

 

37,278

 

 

 

40,057

 

 

 

1,714

 

 

 

79,049

 

Merchandise
  contribution
4

 

5,444

 

 

 

12,192

 

 

 

919

 

 

 

18,555

 

 

 

9,760

 

 

 

16,198

 

 

 

919

 

 

 

26,877

 

Merchandise margin 5

 

34.8

%

 

 

31.0

%

 

 

32.3

%

 

 

 

 

 

33.5

%

 

 

31.0

%

 

 

32.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Acquisition of Pride Convenience Holdings, LLC ("Pride")

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 Acquisition from Transit Energy Group and affiliates ("TEG"); includes only the retail stores acquired in the TEG acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 Includes only the retail stores acquired in the WTG acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4 Calculated as merchandise revenue less merchandise costs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5 Calculated as merchandise contribution divided by merchandise revenue.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the second quarter, retail fuel profitability (excluding intercompany charges by the Company’s wholesale fuel distribution subsidiary, GPM Petroleum LP (“GPMP”)) increased approximately $11.9 million to $116.6 million compared to the prior year period, with resilient fuel margin capture of 39.7 cents per gallon, which decreased 1.6 cents per gallon for the second quarter of 2023 compared to the prior year period. Same store fuel profit was $97.5 million (excluding intercompany charges by GPMP), compared to $102.7 million for the prior year quarter. This decrease in same store fuel profit was fully offset by approximately $19.0 million incremental fuel profit from recent acquisitions.

Same store merchandise sales excluding cigarettes increased 3.8% for the quarter compared to the second quarter of 2022. Same store merchandise sales increased 0.7% compared to the prior year period, primarily due to higher revenue from the Company’s six core destination categories (packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks and beer), other tobacco

 


 

products and franchises as a result of marketing initiatives, including expanded category assortments, new franchise food offerings and investments in coolers and freezers, which was partially offset by lower revenue from cigarettes. Total merchandise contribution for the quarter increased $23.3 million, or 17.7%, compared to the second quarter of 2022, with merchandise margin increasing 150 basis points, to 31.9% from 30.4% in the second quarter of 2022, primarily due to higher contribution from the Company’s six core destination categories and franchises. The increase in merchandise contribution was due to $18.6 million from recent acquisitions, and an increase at same stores of $6.5 million.

Wholesale

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Fuel gallons sold – fuel supply locations

 

213,136

 

 

 

193,164

 

 

 

395,563

 

 

 

374,105

 

Fuel gallons sold – consignment agent locations

 

44,534

 

 

 

37,996

 

 

 

82,496

 

 

 

73,993

 

Fuel margin, cents per gallon1 – fuel supply locations

 

5.9

 

 

 

7.2

 

 

 

6.0

 

 

 

7.1

 

Fuel margin, cents per gallon1 – consignment agent
  locations

 

25.3

 

 

 

32.3

 

 

 

25.8

 

 

 

30.7

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel.

 

 

The table below shows financial information and certain key metrics of recent acquisitions in the Wholesale Segment that do not have comparable information for the prior periods.

 


 

 

For the Three Months Ended June 30, 2023

 

 

For the Six Months Ended June 30, 2023

 

 

Quarles 1

 

 

TEG 2

 

 

WTG 3

 

 

Total

 

 

Quarles 1

 

 

TEG 2

 

 

WTG 3

 

 

Total

 

 

(in thousands)

 

 

 

 

Date of Acquisition:

Jul 22, 2022

 

 

Mar 1, 2023

 

 

Jun 6, 2023

 

 

 

 

 

Jul 22, 2022

 

 

Mar 1, 2023

 

 

Jun 6, 2023

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel revenue

$

19,564

 

 

$

93,660

 

 

$

648

 

 

$

113,872

 

 

$

37,327

 

 

$

122,054

 

 

$

648

 

 

$

160,029

 

Other revenues,
  net

 

310

 

 

 

667

 

 

 

1

 

 

 

978

 

 

 

588

 

 

 

854

 

 

 

1

 

 

 

1,443

 

Total revenues

 

19,874

 

 

 

94,327

 

 

 

649

 

 

 

114,850

 

 

 

37,915

 

 

 

122,908

 

 

 

649

 

 

 

161,472

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel costs

 

18,912

 

 

 

92,267

 

 

 

622

 

 

 

111,801

 

 

 

36,064

 

 

 

119,779

 

 

 

622

 

 

 

156,465

 

Store operating
  expenses

 

488

 

 

 

850

 

 

 

17

 

 

 

1,355

 

 

 

937

 

 

 

1,094

 

 

 

17

 

 

 

2,048

 

Total operating
  expenses

 

19,400

 

 

 

93,117

 

 

 

639

 

 

 

113,156

 

 

 

37,001

 

 

 

120,873

 

 

 

639

 

 

 

158,513

 

Operating income

$

474

 

 

$

1,210

 

 

$

10

 

 

$

1,694

 

 

$

914

 

 

$

2,035

 

 

$

10

 

 

$

2,959

 

Fuel gallons sold

 

5,936

 

 

 

35,508

 

 

 

218

 

 

 

41,662

 

 

 

11,443

 

 

 

45,987

 

 

 

218

 

 

 

57,648

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Acquisition from Quarles Petroleum, Incorporated ("Quarles"); includes only the wholesale business acquired in the Quarles acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 Includes only the wholesale business acquired in the TEG acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 Includes only the wholesale business acquired in the WTG acquisition.

 

 

 

 

 

Wholesale fuel contribution (excluding intercompany charges by GPMP) decreased by approximately $2.5 million for the quarter.

Fuel contribution from fuel supply locations (excluding intercompany charges by GPMP) decreased by $1.5 million for the quarter, primarily due to decreased prompt pay discounts related to lower fuel costs and lower volumes at legacy wholesale sites, which was partially offset by the contribution from recent acquisitions.

Fuel contribution from consignment agent locations (excluding intercompany charges by GPMP) decreased approximately $1.0 million for the quarter, primarily due to lower rack-to-retail margins and decreased prompt pay discounts related to lower fuel costs, which was partially offset by the contribution from recent acquisitions.

Fleet Fueling

The fleet fueling segment reflects a commencement of operations of such segment on July 22, 2022.

 


 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2023

 

 

2023

 

 

(in thousands)

 

Fuel gallons sold – proprietary cardlock locations

 

32,417

 

 

 

63,433

 

Fuel gallons sold – third-party cardlock locations

 

2,036

 

 

 

3,646

 

Fuel margin, cents per gallon1 – proprietary cardlock locations

 

43.9

 

 

 

44.2

 

Fuel margin, cents per gallon1 – third-party cardlock locations

 

7.7

 

 

 

4.9

 

 

 

 

 

 

 

1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed fee charged by GPMP to sites in the fleet fueling segment.

 

 

The table below shows financial information and certain key metrics of recent acquisitions in the Fleet Fueling Segment that do not have comparable information for the prior periods.

 

 

For the Three Months Ended June 30, 2023

 

 

For the Six Months Ended June 30, 2023

 

 

Quarles 1

 

 

WTG 2

 

 

Total

 

 

Quarles 1

 

 

WTG 2

 

 

Total

 

 

(in thousands)

 

 

 

 

Date of Acquisition:

Jul 22, 2022

 

 

Jun 6, 2023

 

 

 

 

 

Jul 22, 2022

 

 

Jun 6, 2023

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel revenue

$

115,986

 

 

$

5,160

 

 

$

121,146

 

 

$

243,480

 

 

$

5,160

 

 

$

248,640

 

Other revenues, net

 

1,640

 

 

 

36

 

 

 

1,676

 

 

 

2,591

 

 

 

36

 

 

 

2,627

 

Total revenues

 

117,626

 

 

 

5,196

 

 

 

122,822

 

 

 

246,071

 

 

 

5,196

 

 

 

251,267

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fuel costs

 

104,063

 

 

 

4,372

 

 

 

108,435

 

 

 

219,294

 

 

 

4,372

 

 

 

223,666

 

Store operating expenses

 

4,915

 

 

 

128

 

 

 

5,043

 

 

 

9,705

 

 

 

128

 

 

 

9,833

 

Total operating expenses

 

108,978

 

 

 

4,500

 

 

 

113,478

 

 

 

228,999

 

 

 

4,500

 

 

 

233,499

 

Operating income

$

8,648

 

 

$

696

 

 

$

9,344

 

 

$

17,072

 

 

$

696

 

 

$

17,768

 

Fuel gallons sold

 

32,988

 

 

 

1,465

 

 

 

34,453

 

 

 

65,614

 

 

 

1,465

 

 

 

67,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Includes only the fleet fueling business acquired in the Quarles acquisition.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2 Includes only the fleet fueling business acquired in the WTG acquisition.

 

 

The Company recognized strong cash flow from the fleet fueling segment during the quarter. Fuel profitability (excluding intercompany charges by GPMP) was approximately $14.4 million for the quarter.

 

 

 


 

Store Operating Expenses

For the second quarter of 2023, convenience store operating expenses increased $29.5 million, or 17.5% as compared to the prior year period, primarily due to $29.8 million of expenses related to recent acquisitions and an increase of $3.2 million in expenses at same stores, mainly driven by $4.2 million, or 6.5% as compared to the prior year period, of higher personnel costs. The increase in store operating expenses was partially offset by underperforming retail stores that the Company closed or converted to dealer locations.

Long-Term Growth Strategy Updates

Credit Line Increase and Renewal

On May 5, 2023, GPMP renewed and extended its revolving credit facility with a syndicate of banks led by Capital One, National Association. The credit line was increased to $800 million, and its maturity was extended to May 2028.

Extension of Oak Street Program Agreement

On May 2, 2023, the Company and affiliates of Oak Street, entered into a third amendment to the Program Agreement, which, among other things, extended the term of the Program Agreement and the exclusivity period thereunder through September 30, 2024, and provides for up to $1.5 billion of capacity under the Program Agreement from the date of such amendment through September 30, 2024, not including the funding for the WTG Acquisition.

Acquisitions

On June 6, 2023, the Company closed on its acquisition of the assets of WTG, which, at closing, operated 24 company-operated Uncle’s convenience stores across western Texas. As part of this acquisition, the Company also acquired WTG’s GASCARD-branded fleet fueling network, including 68 proprietary fleet fueling cardlock sites strategically located in large industrial areas in Western Texas and Southeastern New Mexico and 43 private cardlock sites. The WTG Acquisition included three land parcels and nine independent dealer locations.

Liquidity and Capital Expenditures

As of June 30, 2023, the Company’s total liquidity was approximately $822 million, consisting of cash and cash equivalents of approximately $220 million and approximately $602 million of availability under lines of credit. Outstanding debt was $824 million, resulting in net debt, excluding financing leases, of approximately $604 million. Capital expenditures were approximately $26.7 million for the quarter.

Quarterly Dividend and Share Repurchase Program

The Company’s ability to return cash to its stockholders through its cash dividend program and share repurchase program is consistent with its capital allocation framework and reflects the Company’s confidence in the strength of its cash generation ability and financial position.

The Company’s Board of Directors declared a quarterly dividend of $0.03 per share of common stock, to be paid on September 1, 2023, to stockholders of record as of August 15, 2023.

 


 

On May 16, 2023, the Company’s Board of Directors increased the Company’s previously authorized share repurchase program from $50 million to $100 million. During the quarter, the Company repurchased approximately 1.5 million shares of common stock under the repurchase program for approximately $11.2 million, or an average share price of $7.55. There is approximately $49 million remaining under the expanded share repurchase program as of June 30, 2023.

Company-Operated Retail Store Count and Segment Update

The following tables present certain information regarding changes in the retail, wholesale and fleet fueling segments for the periods presented:

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

Retail Segment

2023

 

 

2022

 

 

2023

 

 

2022

 

Number of sites at beginning of period

 

1,531

 

 

 

1,396

 

 

 

1,404

 

 

 

1,406

 

Acquired sites

 

24

 

 

 

 

 

 

159

 

 

 

 

Newly opened or reopened sites

 

2

 

 

 

 

 

 

3

 

 

 

 

Company-controlled sites converted to

 

 

 

 

 

 

 

 

 

 

 

 consignment or fuel supply locations, net

 

(6

)

 

 

(1

)

 

 

(11

)

 

 

(7

)

Closed, relocated or divested sites

 

(4

)

 

 

(7

)

 

 

(8

)

 

 

(11

)

Number of sites at end of period

 

1,547

 

 

 

1,388

 

 

 

1,547

 

 

 

1,388

 

 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

Wholesale Segment 1

2023

 

 

2022

 

 

2023

 

 

2022

 

Number of sites at beginning of period 2

 

1,841

 

 

 

1,625

 

 

 

1,674

 

 

 

1,628

 

Acquired sites 2

 

9

 

 

 

 

 

 

190

 

 

 

 

Newly opened or reopened sites 3

 

17

 

 

 

21

 

 

 

24

 

 

 

40

 

Consignment or fuel supply locations

 

 

 

 

 

 

 

 

 

 

 

converted from Company-controlled sites, net

 

6

 

 

 

1

 

 

 

11

 

 

 

7

 

Closed, relocated or divested sites

 

(49

)

 

 

(27

)

 

 

(75

)

 

 

(55

)

Number of sites at end of period

 

1,824

 

 

 

1,620

 

 

 

1,824

 

 

 

1,620

 

 

 

 

 

 

 

 

 

 

 

 

 

1 Excludes bulk and spot purchasers.

 

2 As part of our review of the initial accounting for the TEG Acquisition, we have adjusted the number of acquired sites to exclude 11 spot purchasers acquired, consistent with our historical methodology. There was no impact on our previously reported gallons sold or financial results.

 

3 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date.

 

 

 

 


 

 

For the Three and Six Months Ended June 30,

 

Fleet Fueling Segment

2023

 

Number of sites at beginning of period

 

183

 

Acquired sites

 

111

 

Closed, relocated or divested sites

 

(1

)

Number of sites at end of period

 

293

 

 

Conference Call and Webcast Details

The Company will host a conference call to discuss these results at 10:00 a.m. Eastern Time on August 8, 2023. Investors and analysts interested in participating in the live call can dial 877-605-1792 or 201-689-8728.

A simultaneous, live webcast will also be available on the Investor Relations section of the Company’s website at https://www.arkocorp.com/news-events/ir-calendar. The webcast will be archived for 30 days.

About ARKO Corp.

ARKO Corp. (Nasdaq: ARKO) is a Fortune 500 company that owns 100% of GPM Investments, LLC and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. Based in Richmond, VA, our highly recognizable family of community brands offers delicious, prepared foods, beer, snacks, candy, hot and cold beverages, and multiple popular quick serve restaurant brands. Our high value fas REWARDS® loyalty program offers exclusive savings on merchandise and gas. We operate in four reportable segments: retail, which includes convenience stores selling merchandise and fuel products to retail customers; wholesale, which supplies fuel to independent dealers and consignment agents; GPM Petroleum, which sells and supplies fuel to our retail and wholesale sites and charges a fixed fee, primarily to our fleet fueling sites; and fleet fueling, which includes the operation of proprietary and third-party cardlock locations, and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites. To learn more about GPM stores, visit: www.gpminvestments.com. To learn more about ARKO, visit: www.arkocorp.com.

Forward-Looking Statements

This document includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may address, among other things, the Company’s expected financial and operational results and the related assumptions underlying its expected results. These forward-looking statements are distinguished by use of words such as “anticipate,” “aim,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and the negative of these terms, and similar references to future periods. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to, among other things, changes in economic, business and market conditions; the Company’s ability to maintain the listing of its common stock and warrants on the Nasdaq Stock Market; changes in its strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; expansion plans and opportunities; changes in the markets in which it competes; changes in applicable laws or regulations, including those relating

 


 

to environmental matters; market conditions and global and economic factors beyond its control; and the outcome of any known or unknown litigation and regulatory proceedings. Detailed information about these factors and additional important factors can be found in the documents that the Company files with the Securities and Exchange Commission, such as Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements speak only as of the date the statements were made. The Company does not undertake an obligation to update forward-looking information, except to the extent required by applicable law.

Use of Non-GAAP Measures

The Company discloses certain measures on a “same store basis,” which is a non-GAAP measure. Information disclosed on a “same store basis” excludes the results of any store that is not a “same store” for the applicable period. A store is considered a same store beginning in the first quarter in which the store had a full quarter of activity in the prior year. The Company believes that this information provides greater comparability regarding its ongoing operating performance. Neither this measure nor those described below should be considered an alternative to measurements presented in accordance with generally accepted accounting principles in the United States (“GAAP”).

The Company defines EBITDA as net income before net interest expense, income taxes, depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets, impairment charges, acquisition costs, other non-cash items, and other unusual or non-recurring charges. Each of EBITDA and Adjusted EBITDA is a non-GAAP financial measure.

The Company uses EBITDA and Adjusted EBITDA for operational and financial decision-making and believe these measures are useful in evaluating its performance because they eliminate certain items that it does not consider indicators of its operating performance. EBITDA and Adjusted EBITDA are also used by many of its investors, securities analysts, and other interested parties in evaluating its operational and financial performance across reporting periods. The Company believes that the presentation of EBITDA and Adjusted EBITDA provides useful information to investors by allowing an understanding of key measures that it uses internally for operational decision-making, budgeting, evaluating acquisition targets, and assessing its operating performance.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income or any other financial measure presented in accordance with GAAP. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of its results as reported under GAAP. The Company strongly encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

Because non-GAAP financial measures are not standardized, same store measures, EBITDA and Adjusted EBITDA, as defined by the Company, may not be comparable to similarly titled measures reported by other companies. It therefore may not be possible to compare the Company’s use of these non-GAAP financial measures with those used by other companies.

Media Contact

Andrew Petro

Matter on behalf of ARKO

(978) 518-4531

 


 

apetro@matternow.com

 

Investor Contact

Ross Parman

ARKO Corp.

investors@gpminvestments.com

 

 

 


 

 

Condensed consolidated statements of operations

 

 

 

 

 

 

 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Fuel revenue

$

1,957,100

 

 

$

2,085,854

 

 

$

3,618,764

 

 

$

3,669,380

 

Merchandise revenue

 

484,561

 

 

 

431,751

 

 

 

884,849

 

 

 

798,736

 

Other revenues, net

 

27,480

 

 

 

22,658

 

 

 

53,904

 

 

 

44,958

 

Total revenues

 

2,469,141

 

 

 

2,540,263

 

 

 

4,557,517

 

 

 

4,513,074

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Fuel costs

 

1,801,103

 

 

 

1,955,019

 

 

 

3,338,985

 

 

 

3,425,668

 

Merchandise costs

 

329,903

 

 

 

300,387

 

 

 

607,226

 

 

 

559,180

 

Store operating expenses

 

218,002

 

 

 

178,077

 

 

 

410,685

 

 

 

344,615

 

General and administrative expenses

 

42,660

 

 

 

32,956

 

 

 

83,076

 

 

 

64,741

 

Depreciation and amortization

 

32,837

 

 

 

24,353

 

 

 

61,236

 

 

 

48,989

 

Total operating expenses

 

2,424,505

 

 

 

2,490,792

 

 

 

4,501,208

 

 

 

4,443,193

 

Other expenses, net

 

4,956

 

 

 

1,197

 

 

 

7,676

 

 

 

2,318

 

Operating income

 

39,680

 

 

 

48,274

 

 

 

48,633

 

 

 

67,563

 

Interest and other financial income

 

2,428

 

 

 

8,997

 

 

 

9,630

 

 

 

6,710

 

Interest and other financial expenses

 

(22,588

)

 

 

(16,336

)

 

 

(43,392

)

 

 

(30,024

)

Income before income taxes

 

19,520

 

 

 

40,935

 

 

 

14,871

 

 

 

44,249

 

Income tax expense

 

(5,014

)

 

 

(9,157

)

 

 

(2,856

)

 

 

(10,162

)

(Loss) income from equity investment

 

(27

)

 

 

28

 

 

 

(63

)

 

 

37

 

Net income

$

14,479

 

 

$

31,806

 

 

$

11,952

 

 

$

34,124

 

Less: Net income attributable to non-controlling
  interests

 

48

 

 

 

52

 

 

 

101

 

 

 

131

 

Net income attributable to ARKO Corp.

$

14,431

 

 

$

31,754

 

 

$

11,851

 

 

$

33,993

 

Series A redeemable preferred stock dividends

 

(1,434

)

 

 

(1,434

)

 

 

(2,852

)

 

 

(2,852

)

Net income attributable to common shareholders

$

12,997

 

 

$

30,320

 

 

$

8,999

 

 

$

31,141

 

Net income per share attributable to common
  shareholders - basic

$

0.11

 

 

$

0.25

 

 

$

0.07

 

 

$

0.25

 

Net income per share attributable to common
  shareholders - diluted

$

0.11

 

 

$

0.24

 

 

$

0.07

 

 

$

0.25

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

119,893

 

 

 

121,529

 

 

 

120,073

 

 

 

122,909

 

Diluted

 

121,280

 

 

 

130,558

 

 

 

120,767

 

 

 

123,245

 

 

 


 

 

 

Condensed consolidated balance sheets

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

(in thousands)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

220,142

 

 

$

298,529

 

Restricted cash

 

15,136

 

 

 

18,240

 

Short-term investments

 

3,319

 

 

 

2,400

 

Trade receivables, net

 

135,663

 

 

 

118,140

 

Inventory

 

256,116

 

 

 

221,951

 

Other current assets

 

101,435

 

 

 

87,873

 

Total current assets

 

731,811

 

 

 

747,133

 

Non-current assets:

 

 

 

 

 

Property and equipment, net

 

748,697

 

 

 

645,809

 

Right-of-use assets under operating leases

 

1,418,902

 

 

 

1,203,188

 

Right-of-use assets under financing leases, net

 

174,221

 

 

 

182,113

 

Goodwill

 

277,795

 

 

 

217,297

 

Intangible assets, net

 

219,598

 

 

 

197,123

 

Equity investment

 

2,861

 

 

 

2,924

 

Deferred tax asset

 

57,007

 

 

 

22,728

 

Other non-current assets

 

40,565

 

 

 

36,855

 

Total assets

$

3,671,457

 

 

$

3,255,170

 

Liabilities

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Long-term debt, current portion

$

13,369

 

 

$

11,944

 

Accounts payable

 

233,459

 

 

 

217,370

 

Other current liabilities

 

166,056

 

 

 

154,097

 

Operating leases, current portion

 

63,811

 

 

 

57,563

 

Financing leases, current portion

 

4,916

 

 

 

5,457

 

Total current liabilities

 

481,611

 

 

 

446,431

 

Non-current liabilities:

 

 

 

 

 

Long-term debt, net

 

810,302

 

 

 

740,043

 

Asset retirement obligation

 

79,837

 

 

 

64,909

 

Operating leases

 

1,422,736

 

 

 

1,218,045

 

Financing leases

 

223,871

 

 

 

225,907

 

Other non-current liabilities

 

275,584

 

 

 

178,945

 

Total liabilities

 

3,293,941

 

 

 

2,874,280

 

 

 

 

 

 

 

Series A redeemable preferred stock

 

100,000

 

 

 

100,000

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

Common stock

 

12

 

 

 

12

 

Treasury stock

 

(53,804

)

 

 

(40,042

)

Additional paid-in capital

 

238,617

 

 

 

229,995

 

Accumulated other comprehensive income

 

9,119

 

 

 

9,119

 

Retained earnings

 

83,533

 

 

 

81,750

 

Total shareholders' equity

 

277,477

 

 

 

280,834

 

Non-controlling interest

 

39

 

 

 

56

 

Total equity

 

277,516

 

 

 

280,890

 

Total liabilities, redeemable preferred stock and equity

$

3,671,457

 

 

$

3,255,170

 

 

 


 

 

 

 


 

 

Condensed consolidated statements of cash flows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net income

$

14,479

 

 

$

31,806

 

 

$

11,952

 

 

$

34,124

 

Adjustments to reconcile net income to net
 cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

32,837

 

 

 

24,353

 

 

 

61,236

 

 

 

48,989

 

Deferred income taxes

 

(3,885

)

 

 

5,248

 

 

 

(14,115

)

 

 

2,671

 

Loss on disposal of assets and impairment charges

 

2,991

 

 

 

1,207

 

 

 

3,278

 

 

 

1,971

 

Foreign currency loss

 

24

 

 

 

191

 

 

 

58

 

 

 

228

 

Amortization of deferred financing costs and debt discount

 

621

 

 

 

628

 

 

 

1,213

 

 

 

1,262

 

Amortization of deferred income

 

(2,069

)

 

 

(2,214

)

 

 

(3,929

)

 

 

(5,292

)

Accretion of asset retirement obligation

 

627

 

 

 

420

 

 

 

1,118

 

 

 

829

 

Non-cash rent

 

3,760

 

 

 

1,791

 

 

 

6,558

 

 

 

3,737

 

Charges to allowance for credit losses

 

290

 

 

 

216

 

 

 

573

 

 

 

351

 

Loss (income) from equity investment

 

27

 

 

 

(28

)

 

 

63

 

 

 

(37

)

Share-based compensation

 

4,555

 

 

 

3,108

 

 

 

8,624

 

 

 

5,882

 

Fair value adjustment of financial assets and liabilities

 

(1,020

)

 

 

(7,799

)

 

 

(5,248

)

 

 

(6,590

)

Other operating activities, net

 

647

 

 

 

584

 

 

 

976

 

 

 

707

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

Increase in trade receivables

 

(6,991

)

 

 

(18,605

)

 

 

(18,173

)

 

 

(31,491

)

Increase in inventory

 

(5,363

)

 

 

(14,629

)

 

 

(8,208

)

 

 

(35,947

)

(Increase) decrease in other assets

 

(14,510

)

 

 

(10,608

)

 

 

(10,965

)

 

 

7,607

 

Increase in accounts payable

 

8,640

 

 

 

26,230

 

 

 

14,580

 

 

 

46,407

 

Decrease in other current liabilities

 

(7,524

)

 

 

(6,763

)

 

 

(7,651

)

 

 

(11,324

)

(Decrease) increase in asset retirement obligation

 

(21

)

 

 

 

 

 

46

 

 

 

(34

)

Increase in non-current liabilities

 

1,988

 

 

 

6,964

 

 

 

4,000

 

 

 

8,112

 

Net cash provided by operating activities

 

30,103

 

 

 

42,100

 

 

 

45,986

 

 

 

72,162

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(26,658

)

 

 

(24,501

)

 

 

(50,038

)

 

 

(45,168

)

Purchase of intangible assets

 

(35

)

 

 

(125

)

 

 

(35

)

 

 

(125

)

Proceeds from sale of property and equipment

 

88,049

 

 

 

328

 

 

 

296,485

 

 

 

7,261

 

Prepayment for business acquisition

 

 

 

 

 

 

 

 

 

 

(5,000

)

Business acquisitions, net of cash

 

(143,294

)

 

 

(107

)

 

 

(481,636

)

 

 

(6,853

)

Decrease in investments, net

 

 

 

 

25,491

 

 

 

 

 

 

27,109

 

Repayment of loans to equity investment

 

 

 

 

174

 

 

 

 

 

 

174

 

Net cash (used in) provided by investing activities

 

(81,938

)

 

 

1,260

 

 

 

(235,224

)

 

 

(22,602

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Receipt of long-term debt, net

 

19,233

 

 

 

 

 

 

74,233

 

 

 

 

Repayment of debt

 

(4,919

)

 

 

(2,936

)

 

 

(10,511

)

 

 

(6,093

)

Principal payments on financing leases

 

(1,494

)

 

 

(1,652

)

 

 

(2,912

)

 

 

(3,304

)

Proceeds from sale-leaseback

 

28,793

 

 

 

 

 

 

80,397

 

 

 

 

Payment of Additional Consideration

 

 

 

 

(2,085

)

 

 

 

 

 

(2,085

)

Payment of Ares Put Option

 

(9,808

)

 

 

 

 

 

(9,808

)

 

 

 

 


 

Common stock repurchased

 

(11,253

)

 

 

(26,954

)

 

 

(13,563

)

 

 

(40,038

)

Dividends paid on common stock

 

(3,607

)

 

 

(2,415

)

 

 

(7,216

)

 

 

(4,889

)

Dividends paid on redeemable preferred stock

 

(1,434

)

 

 

(1,434

)

 

 

(2,852

)

 

 

(2,852

)

Distributions to non-controlling interests

 

 

 

 

(60

)

 

 

 

 

 

(120

)

Net cash provided by (used in) financing activities

 

15,511

 

 

 

(37,536

)

 

 

107,768

 

 

 

(59,381

)

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(36,324

)

 

 

5,824

 

 

 

(81,470

)

 

 

(9,821

)

Effect of exchange rate on cash and cash equivalents and restricted cash

 

 

 

 

(105

)

 

 

(21

)

 

 

(121

)

Cash and cash equivalents and restricted cash, beginning of period

 

271,602

 

 

 

256,882

 

 

 

316,769

 

 

 

272,543

 

Cash and cash equivalents and restricted cash, end of period

$

235,278

 

 

$

262,601

 

 

$

235,278

 

 

$

262,601

 

 


 

 

 

Reconciliation of EBITDA and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Net income

$

14,479

 

 

$

31,806

 

 

$

11,952

 

 

$

34,124

 

Interest and other financing expenses, net

 

20,160

 

 

 

7,339

 

 

 

33,762

 

 

 

23,314

 

Income tax expense

 

5,014

 

 

 

9,157

 

 

 

2,856

 

 

 

10,162

 

Depreciation and amortization

 

32,837

 

 

 

24,353

 

 

 

61,236

 

 

 

48,989

 

EBITDA

 

72,490

 

 

 

72,655

 

 

 

109,806

 

 

 

116,589

 

Non-cash rent expense (a)

 

3,760

 

 

 

1,791

 

 

 

6,558

 

 

 

3,737

 

Acquisition costs (b)

 

3,277

 

 

 

823

 

 

 

6,853

 

 

 

1,504

 

Loss on disposal of assets and impairment charges (c)

 

2,991

 

 

 

1,207

 

 

 

3,278

 

 

 

1,971

 

Share-based compensation expense (d)

 

4,555

 

 

 

3,108

 

 

 

8,624

 

 

 

5,882

 

Loss (income) from equity investment (e)

 

27

 

 

 

(28

)

 

 

63

 

 

 

(37

)

Adjustment to contingent consideration (f)

 

(922

)

 

 

(526

)

 

 

(1,624

)

 

 

(526

)

Other (g)

 

64

 

 

 

15

 

 

 

168

 

 

 

33

 

Adjusted EBITDA

$

86,242

 

 

$

79,045

 

 

$

133,726

 

 

$

129,153

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Eliminates the non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeds (or is less than) our cash rent payments. The GAAP rent expense adjustment can vary depending on the terms of our lease portfolio, which has been impacted by our recent acquisitions. For newer leases, our rent expense recognized typically exceeds our cash rent payments, while for more mature leases, rent expense recognized is typically less than our cash rent payments.

 

 

 

 

 

 

 

 

 

 

 

 

 

(b) Eliminates costs incurred that are directly attributable to historical business acquisitions and salaries of employees whose primary job function is to execute our acquisition strategy and facilitate integration of acquired operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

(c) Eliminates the non-cash loss (gain) from the sale of property and equipment, the loss (gain) recognized upon the sale of related leased assets, and impairment charges on property and equipment and right-of-use assets related to closed and non-performing sites.

 

 

 

 

 

 

 

 

 

 

 

 

 

(d) Eliminates non-cash share-based compensation expense related to the equity incentive program in place to incentivize, retain, and motivate our employees, certain non-employees and members of the Board.

 

 

 

 

 

 

 

 

 

 

 

 

 

(e) Eliminates our share of loss (income) attributable to our unconsolidated equity investment.

 

 

 

 

 

 

 

 

 

 

 

 

 

(f) Eliminates fair value adjustments to the contingent consideration owed to the seller for the 2020 acquisition of Empire.

 

 

 

 

 

 

 

 

 

 

 

 

 

(g) Eliminates other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance.